by Shawn Scanlon
The Bailout legislation that recently passed was the only way to help the ailing economy.
At least that’s how it was sold to us. But the salespeople were wrong. There were a myriad of ways that government could have helped during these difficult times. But let’s look at at from a different perspective. What bad things might have happened if the bailout legislation had not been passed?
- College students are unable to receive loans to pay for tuition.
- GM fails. Every single person working there loses their job.
- Home sales will plummet without the availability of credit.
Now, these aren’t the only economic problems that we might have faced sans-bailout, but those were three very strong arguments for passing the bailout legislation. Here’s the problem: both political parties see a top-down $800 billion solution as the best approach to help the American economy. A working-class friendly solution might have looked a bit more like this:
- Government has an interest in the industry that they are subsidizing equal to the shares that are purchased, rather than giving money without control. For example, the government could have purchased shares of AIG at $3 each; to have had a controlling stake would cost $4.035 billion.
- College students would still have access to Pell grants and government loans. The current crisis would have zero effect on the availability of these programs. However, some students may have trouble finding private lenders. The government could expand their loan programs to cover these students struggling to find loans.
- Or, as another option, give every college student in America (pdf) a scholarship for $5,000. This second option would cost $83.5 billion. This would cut college costs in half for students attending public universities. Students would still qualify for Pell grants and government loans.
- GM has 266,000 employees. A job works program could employ 1 million Americans for five years at a cost of $200 billion. The average salary would be $40,000.
- This last claim is simply untrue. Rather than plummeting, home sales have done quite well, even in the current market. People are still buying houses, and the government does not need to guarantee home ownership; giving mortgages that people can’t afford is a problem. People with good jobs and good credit ought to own homes. The government ought to treat the illness, not the symptom.
During the debate over bailout legislation, there were sober folks on each side of the issue providing good information. So no, it wasn’t “smart” people versus “dumb” people in this debate. In fact, a story on NPR noted that 200 economists (each of them smart) did not agree that the bailout legislation was necessary. Of course, there were other economists who did believe that it was important to pass said legislation. I don’t doubt their intelligence; I simply disagree with their method for stimulating the economy.